Deal of the Year

Uncommon Scents

On Monday this week, Buyouts Insider dubbed BlackRock’s investment in Creed as the International Deal of the Year, one of the categories in the annual Deals of the Year report.

BlackRock’s Long Term Private Capital (LTPC) team acquired Creed in 2020:

• Purchase Price: $310M

• Exit: to Kering Beauté in 2023 for $3.3B in proceeds

• MOIC: ~10.5X

• IRR: ~120%

Creed is a U.K.-based men’s fragrance brand that was founded in 1760, originally a bespoke tailoring business that counted Queen Victoria as a client. The company also made perfumes exclusively for high profile celebrities and socialites with pockets deep enough to warrant one-off creations.

Over time, the company realized that selling their scents to the general public was a far more profitable strategy, which led to the rollout of Green Irish Tweed in the 1980s.

Creed’s magnum opus was the Aventus fragrance in 2010. Olivier Creed, head of perfumes at Creed, said that the inspiration for Aventus came from Napoleon Bonaparte. Composed of blackcurrant, birch, oakmoss, and other notes, Aventus priced at $495 as recently as 2018.

Before we get overly intoxicated by the fumes, let’s dive into how BlackRock pulled off a 10X return in just 3 years

Solid Foundation

BlackRock LTPC is a direct private equity strategy that makes $500M+ control focused investments with a focus on U.S. and Western Europe geographies. The fund launched in 2019 with $2.75B in capital commitments and has made 7 investments to date. Creed was LTPC’s second deal.

Dag Skattum, the head of LTPC Europe, led the Creed investment in the middle of the COVID pandemic in 2020.

At the time, Creed had historical net revenue growth of 12% CAGR, LTM net revenue of ~$83M and LTM EBITDA of ~$56M.

By the time of exit, these numbers ballooned to LTM net revenue of ~$310M and LTM EBITDA of ~$152M.

Value Drivers:

• Talent Acquisition: LTPC immediately begun hiring, with new CEO Sarah Rotheram. Also brought on a CFO, CMO, Head of Production, and others in just 6 months.

• Distribution Control: Acquired its two largest distributors, bringing total headcount from 25 to near 700. These purchases allowed for pricing control and enhanced margins.

• Expansion: Developed Creed’s first global marketing push and saw significant growth in Asian markets, particularly China. LTPC also crafted a women’s fragrance strategy and dove deeper into e-commerce.

High Fashion

By the time Kering initiated acquisition discussions in early 2023, Creed was a well-oiled enterprise with a unique value proposition as a storied perfume business that produced their fragrances in-house, which is incredibly rare.

Although the deal seems expensive at 14X revenue, the 23X EBITDA multiple is in line with luxury brand acquisitions in the beauty space. This acquisition is also synergistic considering Kering’s plan to begin developing in-house perfumes for its fashion brands. The fashion giant sees fragrances as a high margin business that is growing faster than other beauty verticals.

Significant fragrance acquisitions in the past few years include:

• 2022: Puig buys Byredo ($1B)

• 2023: Estée Lauder buys Tom Ford ($2.3B)

• 2023: Kering buys Creed ($3.3B)

Kering is known for its robust portfolio of luxury holdings, with Gucci at the core, flanked by brands like Balenciaga, Saint Laurent, Alexander McQueen, and Bottega Veneta.

Its most direct competitor is LVMH, the fashion and alcohol conglomerate that dwarfs Kering’s holdings with brands like Louis Vutton, Off-White, Dior, and Dom Perignon.

mainstreet media

We recently had Emma Clark from Sweater VC on the mainstreet media podcast. Sweater allows unaccredited investors to invest in VC funds for as low as $500. Their signature offering, The Cashmere Fund, invests in high growth startups driving disruption and impacting the lives of everyday consumers. Check out the episode here

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